Shares in Reliance Industries Ltd fell as much as 2.1% on Thursday, a day after anti-corruption activist Arvind Kejriwal accused the energy conglomerate of hoarding natural gas and exerting pressure on the government to favour it.
The company denies the allegations.
Kejriwal, whose group India Against Corruption (IAC) has won publicity in India by accusing ruling Congress party chief Sonia Gandhi's son in law Robert Vadra of taking part in shady dealings, said on Wednesday that Reliance has profited from cosy relationships with a string of government ministers.
Those ministers favoured the company in its oil and gas ventures off the Andhra coast, Kejriwal told a crowded news conference in New Delhi on Wednesday.
Reliance Industries, controlled by Mukesh Ambani, India's richest person, said in a statement that the allegations were "devoid of any truth or substance whatsoever".
"Irresponsible allegations made by IAC at the behest of vested interests without basic understanding of the complexities of a project of this nature does not merit a response," Reliance said in a statement late on Wednesday.
Kejriwal's allegations were unlikely to have a long-term impact on Reliance shares, analysts said.
"Reliance Industries is falling because of a knee-jerk reaction to Kejriwal's comments," said Kishore Ostwal, chairman and managing director at equity research firm CNI Research.
While Reliance has long been perceived by many Indians as politically influential, investors say the firm's relationship with New Delhi has recently been fractious as a result of the performance of its flagship gas project on the east coast.
Reliance and its partner BP Plc have blamed technical problems for falling gas production, and have sought permission to charge higher prices to cover spending, but the government has so far refused to approve higher gas fees.
Shares in Reliance were down 0.7% as of 11.20 am.